Rebirth

The Tiananmen debacle resulted in a brief spell of conservatism, but within a few years, Deng Xiaoping choreographed the rebirth of reform and openness with his historic “southern tour.” With Deng’s assurance that “to get rich is glorious,” entrepreneurial energy exploded again, concentrated now in the coastal cities. The leadership, guided by economic czar Zhu Rongji, enacted a far-reaching structural transformation of the economic sphere, anchored in privatization of state-owned enterprises. Ironically, China’s lack of full reform—especially in the financial sector and monetary policy—protected the Chinese economy from the vicissitudes of hot money and capital flight that ravaged its neighbors during the East Asian financial crisis.

Deng Accepted That There Were Limits to His Expertise

Changing China's Market Framework

China's Opacity Protected it from Crisis

Entrepreneurship Was a Key to China's Boom

Edward Tse

Chairman, Greater China, Booz & Company

Edward Tse is senior partner and chairman for Greater China for consulting firm Booz & Company (Shanghai, Beijing, Hong Kong and Taipei). He has over 20 years of management consulting and senior corporate management experience and is widely known as one of the pioneers in China’s management consulting profession.

Dr. Tse has held a number of leadership positions ranging from being managing partner, China for the Boston Consulting Group, to being a member of the Consultative Editorial Board of Harvard Business Review Chinese Edition. A recognized thought leader, Dr. Tse has authored numerous articles and is author of two books: Direction – What Chinese Enterprises Should Learn (in Chinese; Winter 2007) and The China Strategy – Harnessing the Power of the World’s Fastest-Growing Economy (Spring 2010).

Dr. Tse holds a Ph.D. in Engineering and an MBA from the University of California, Berkeley where he received the Converse Prize for being the most outstanding graduate student. He also has a MS and BS in Engineering from the Massachusetts Institute of Technology.

Multinationals, when they came to China, they, of course, brought employment opportunities for many of the local people. They made investments, so they brought capital and you know, of course, they pay taxes to the local governments and so on. But also, for many of the multinationals, when they came, they also brought along their technology, their business models, their capabilities. In many ways I think the Chinese were actually quite struck by how multinational corporations actually work.

As I remember, I returned to mainland China in the early 90s, and at that time when I was in China, in fact the Chinese had no concept of what a company was, they had enterprises, they didn't have companies really. And a state-owned company, a state-owned enterprise, at that time was really just an arm of the state, and they fulfilled the designed role by the state to each of the enterprises. Which was, of course, a very different notion than what a company is all about. But, over time the Chinese enterprises, and of course many of them turned into companies, when they interact with multinationals they actually find out, "Hey, there's actually another way of running a business." And so, the Chinese were trying to learn from the foreign companies in many different ways, not only about technology, not only about products and services and so on, but, importantly, the Chinese were trying to learn about management practices, about corporate governance and the legal aspects and so on and so forth.

And, in fact, for many of the work that we have been doing for these Chinese companies, it is requested by the Chinese companies, because they are so interested in how foreign companies actually run the businesses, so, in many cases, we are asked by our Chinese companies to "benchmark" the best practices, the world's best practices. Right? What do the world's best companies in my industry actually do? How do they run the business? How do they organize themselves? What are the key processes, management processes, business processes that these so-called best practice companies actually do? And Chinese companies are very curious about all that, they are eager to learn, because the very best Chinese companies are actually very ambitious. Many of them, of course, want to be the leaders in their industries within China and also, an increasing number of them would like to become international companies of their own right. And so in the Chinese way of saying, "they want to go outside". So, more and more Chinese companies are coming to us asking us to help them to help them design their globalization strategy. How should they internationalize? Which markets should they go to? How should they set up their product strategy? Should they form local partnerships when they go outside? And so on and so forth. So, the Chinese are learning a lot, and they continue to be very ambitious.